Day: December 10, 2018

Bitcoin is real money, as the European Court of Justice has at least decided on tax issues. Even though the price has fluctuated between 150 and over 1000 euros in recent years, it can be assumed that bitcoins will continue to be valued. It is still unclear what happens to cryptocurrencies when the owner dies. Therefore, here are some precautionary tips.

Tip 1: Storage and backups

By itself, bitcoins are nothing more than information: in a “wallet file”, the wallet.dat, strings are stored that make the owner of the file the owner of a certain amount of currency. This can be imagined as a pure numbered account: Who knows the number, has the account.

Therefore, it is essential for the permanent storage of Bitcoins that this file is not damaged, but also can’t be stolen. It therefore makes sense to make regular, encrypted backups of the file and store it in multiple locations. For example, you could save the file encrypted on a USB stick, in a Dropbox directory and on the home PC.

In this scenario, it is important for the bereaved to know the storage location of the latest wallet.dat, the encryption tool and the password.

Tip 2: inform relatives about Bitcoins

Bitcoin is a niche topic. Therefore, it is even more important to inform relatives in advance that Bitcoin is a virtual currency and that you own Bitcoins. The rough functioning should also be explained.

It is also helpful if the relatives are also told what they can do after the death of the owner with bitcoins, how they can be exchanged for other foreign currencies and who can help in case of doubt.

Tip 3: Wallet services for Bitcoin

If you use Wallet services despite certain security concerns, you can pass on the access data to this service. This eliminates some technical hurdles for survivors.

Tip 4: Rather not pass the treasury

Just who has an old stock of Bitcoins, this has probably acquired largely anonymous. The possibility to buy Bitcoin through banks have only been around for a short time – previously, anonymous purchases via portals or prepaid credit cards were the rule.

Anonymity suggests that the money can be well hidden from the treasury. This is not only illegal, it also has several side effects:

Anonymity only seems to exist, since all transactions that have ever been made with a bitcoin (or parts of it) are stored forever

The money can be heavily exchanged for goods, services or foreign exchange – as with any form of black money

Should the Wallet.dat fall into the wrong hands, the legacy may soon be gone – without the possibility of legal prosecution.

It remains a matter of consideration whether one “reports” the money. In addition, it is not yet known whether and to what extent or on the basis of which price inheritance tax at Bitcoin arises.